India slashes diesel export duty to Rs 23 per litre as crude import costs soar

Key facts

• Export duty on diesel cut to Rs 23 per litre from Rs 55.5 per litre, effective May 1, 2026.
• Export duty on aviation turbine fuel reduced to Rs 33 per litre from Rs 42 per litre.
• Petrol export duty remains nil; domestic excise duties on petrol and diesel unchanged.
• India's crude import prices hit $120 per barrel earlier in April 2026.
• Export levies were introduced on March 27, 2026, to ensure domestic supply during the West Asia crisis.
• Government capped monthly ATF price increase for domestic airlines at 25% in April to control airfares.
• Indian refiners have not raised pump prices of petrol and diesel in four years.
• Jet fuel accounts for up to 40% of an airline's expenses.

Sharp reduction in export duties

India has slashed export duties on diesel and aviation turbine fuel, with the levy on diesel dropping to Rs 23 per litre from Rs 55.5 per litre, according to a government notification issued on Thursday. The export duty on aviation turbine fuel was cut to Rs 33 per litre from Rs 42 per litre. The revised rates take effect on May 1, 2026. The government left duties on domestic consumption of petrol and diesel unchanged, while petrol exports continue to attract no duty. The export levies, introduced on March 27, 2026, are reviewed every fortnight and are linked to average international prices of crude oil and refined products. The previous revision came into effect on April 11.

Soaring crude prices and the Strait of Hormuz crisis

India, the world's third-biggest oil importer and consumer, has been hit by rising oil prices triggered by the closure of the Strait of Hormuz after the U.S.-Israeli war on Iran. Crude import prices rose to $120 per barrel earlier this month, denting the margins of retailers on the sale of gasoline and gasoil. The government stated that the export levies were introduced to ensure domestic availability of petroleum products by discouraging exports amid the West Asia crisis. The duty on diesel now comprises a special additional excise duty of Rs 23 per litre with no road and infrastructure cess.

Impact on refiners and consumers

Indian refiners have not raised pump prices of gasoline and gasoil in four years to shield consumers, despite volatility in global markets. The unchanged domestic excise duties mean that consumers will not face immediate price hikes at the pump. Separately, to control a rise in airfares, the government has capped a monthly increase in aviation turbine fuel prices for domestic airlines at 25% in April. Jet fuel accounts for up to 40% of an airline's expenses, making the cap a significant measure for the aviation sector.

Fortnightly review mechanism

The export duty rates are reviewed every fortnight and are linked to average international prices of crude oil and refined products during the review period. The previous revision came into effect on April 11, and the new rates will be in place for the fortnight beginning May 1. The government notification, issued by the Finance Ministry, clarified that there is no change in excise duty on petrol and diesel meant for domestic consumption. The duty on petrol exports remains nil.

Broader implications for India's energy security

The sharp reduction in export duties reflects the government's effort to balance the need for domestic supply with the financial health of refiners facing high input costs. By cutting export levies, India aims to make exports more attractive for refiners, potentially easing their margin pressures. However, the move also risks reducing domestic availability if refiners choose to export more. The fortnightly review mechanism allows the government to adjust duties quickly in response to changing market conditions and geopolitical developments.

Outlook and open questions

The effectiveness of the duty cuts in stabilizing fuel prices will depend on the trajectory of global crude oil prices and the duration of the Strait of Hormuz closure. The government's cap on ATF price increases for domestic airlines provides temporary relief but may not be sustainable if crude prices remain elevated. Analysts will be watching whether the duty reductions are sufficient to prevent a rise in pump prices for consumers, who have been shielded for four years. The next fortnightly review, due around mid-May, will offer further clues on the government's strategy.

A calibrated response to a geopolitical crisis

India's decision to slash export duties while maintaining domestic price controls illustrates the delicate balancing act required in a crisis that disrupts global energy flows. The country's heavy reliance on imported crude makes it particularly vulnerable to supply shocks, as seen in the $120 per barrel import prices. By keeping domestic duties unchanged and capping ATF price increases, the government is prioritizing consumer protection. Yet the export duty cuts signal a recognition that refiners need relief to continue operating. The fortnightly review system provides flexibility, but the underlying challenge remains: how to secure affordable energy in a volatile world.

The bottom line

• India cut export duty on diesel from Rs 55.5 to Rs 23 per litre and on ATF from Rs 42 to Rs 33 per litre, effective May 1, 2026.
• Domestic excise duties on petrol and diesel unchanged; petrol export duty remains nil.
• Crude import prices hit $120 per barrel due to Strait of Hormuz closure after U.S.-Israeli war on Iran.
• Export levies were introduced on March 27, 2026, to ensure domestic supply; reviewed fortnightly.
• Government capped monthly ATF price increase for domestic airlines at 25% in April to control airfares.
• Indian refiners have not raised pump prices in four years, absorbing global volatility.